# Binance plans to buy rival FTX in bailout as crypto market crumbles Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-11-09 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: FTX Crypto Token Free Fall: Binance in Emergency Rescue Deal Meta Description: Crypto exchange Binance to buy FTX's non-U.S. unit in a bailout deal to cover liquidity crisis, raising concerns among investors about cryptocurrencies URL: https://financedigest.com/binance-plans-to-buy-rival-ftx-in-bailout-as-crypto-market-crumbleshtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-11-08t223259z1lynxmpeia70zzrtroptp4fintech-crypto-1736814897887-compressed.jpg) By Hannah Lang and Tom Wilson WASHINGTON/LONDON (Reuters) – Crypto giant Binance signed a nonbinding agreement on Tuesday to buy FTX’s non-U.S. unit to help cover a “liquidity crunch” at the rival exchange, in a stunning bailout that [raised fresh concerns among investors](https://www.financedigest.com/boe-raises-rates-again-as-investors-look-towards-end-of-hikes.html "BoE raises rates again as investors look towards end of hikes") about cryptocurrencies. The deal between high-profile rivals Sam Bankman-Fried, FTX’s CEO, and [Binance CEO Changpeng Zhao](https://www.financedigest.com/exclusive-crypto-giant-binance-moved-400-million-from-u-s-partner-to-firm-managed-by-ceo-zhao.html "Exclusive-Crypto giant Binance moved 0 million from U.S. partner to firm managed by CEO Zhao") came as speculation about FTX’s financial health snowballed into $6 billion of withdrawals in the 72 hours before Tuesday morning. The pressure on FTX came in part from Zhao, who had tweeted on Sunday that [Binance would liquidate its holdings of the rival’s token](https://www.financedigest.com/streamrs-data-token-now-listed-on-leading-cryptocurrency-exchange-binance.html "Streamr’s DATA Token Now Listed on Leading Cryptocurrency Exchange, Binance") due to unspecified “recent revelations. It’s scary to think that FTX, which is one of the largest [crypto exchanges](https://www.financedigest.com/exclusive-binance-moved-346-million-for-seized-crypto-exchange-bitzlato-data-show.html "Exclusive-Binance moved 6 million for seized crypto exchange Bitzlato, data show") in the world, was bitten by liquidity concerns and Binance, their biggest rival, is coming to their rescue,” said Dan Raju, CEO of Tradier, financial services provider and brokerage. The move, a dramatic reversal in fortunes of billionaire Bankman-Fried, 30, is the latest emergency rescue in the world of cryptocurrencies this year, as [investors pulled out from riskier assets amid rising interest rates](https://www.financedigest.com/uk-stocks-slip-as-rate-hike-worries-grip-investors.html "UK stocks slip as rate hike worries grip investors"). The cryptocurrency [market has fallen by about two-thirds from its peak](https://www.financedigest.com/no-santa-rally-for-markets-as-central-banks-dampen-peak-rate-hopes.html "No Santa rally for markets as central banks dampen peak rate hopes") to $1.07 trillion. Major cryptocurrencies initially rallied on the news of the deal on Tuesday, but those [gains were quickly erased](https://www.financedigest.com/sterling-erases-post-boe-gains-as-omicron-weighs.html "Sterling erases post-BoE gains as Omicron weighs"). FTX token – which gives holders discounts on FTX trading fees – was last trading at $5.33, having slumped by more than three-quarters. Bitcoin, the biggest digital token, was down 11%. In a blog, Coinbase Global Inc assured [investors it had minimal exposure to FTX](https://www.financedigest.com/wave-of-lawsuits-over-ftx-expected-but-investors-will-face-legal-hurdles.html "‘Wave’ of lawsuits over FTX expected, but investors will face legal hurdles") after its shares fell more than 10%. Bankman-Fried, whose net [worth is $16.6 billion](https://www.financedigest.com/why-a-quiet-revolution-in-the-cloud-is-worth-billions.html "Why A Quiet Revolution In The Cloud Is Worth Billions") according to Forbes, had said just months ago he had billions on hand to help struggling digital asset platforms. In May he [revealed a 7.6% stake in Robinhood Markets](https://www.financedigest.com/2018-property-investment-market-to-be-harder-but-more-rewarding-experts-reveal.html "2018 property investment market to be “harder but more rewarding,” experts reveal") Inc, capitalizing on the trading app’s weakened share price. Tuesday’s developments left FTX [investors scrambling to figure out what the deal with Binance means for their investment](https://www.financedigest.com/investment-inspection-trips-bring-liverpool-to-life-for-asian-property-investors.html "Investment Inspection Trips bring Liverpool to life for Asian property investors") in FTX, according to people familiar with the matter. In a [note to investors late](https://www.financedigest.com/in-loving-and-devoted-memory-king-charles-handwritten-note-to-late-queen.html "‘In loving and devoted memory’: King Charles handwritten note to late queen") on Tuesday, shared on Twitter and verified by a source familiar with the situation, Bankman-Fried tried to reassure FTX investors, saying that “protecting shareholders is our highest priority” but said details of the deal were “still being hashed out.” FTX did not immediately respond to a request for comment. FTX [crypto token in free fall](https://www.financedigest.com/behind-ftxs-fall-battling-billionaires-and-a-failed-bid-to-save-crypto.html "Behind FTX’s fall, battling billionaires and a failed bid to save crypto") https://fingfx.thomsonreuters.com/gfx/ce/movakmgnava/Pasted%20image%201667934577477.png The companies did not disclose the terms of the deal, and it remains to be seen whether it will close. Binance, the world’s biggest crypto exchange, will conduct due diligence in [coming days as the next](https://www.financedigest.com/whats-coming-next-in-the-clearing-and-settlement-world.html "What’s coming next in the clearing and settlement world?") step toward an acquisition of FTX.com. The U.S. operations of Binance and FTX are not part of the deal, said Bankman-Fried, who is from California but lives in the [Bahamas where FTX](https://www.financedigest.com/bahamas-regulator-holds-ftx-assets-pending-delivery-to-customers-creditors.html "Bahamas regulator holds FTX assets pending delivery to customers, creditors") is based. It is not [clear how regulators will regard a deal between the two crypto](https://www.financedigest.com/crypto-firms-will-develop-offshore-without-clear-us-rules-coinbase-chief-says.html "Crypto firms will develop ‘offshore’ without clear US rules, Coinbase chief says") exchanges. U.S. [antitrust enforcers could insist on probing](https://www.financedigest.com/eu-opens-antitrust-probe-into-broadcoms-61-billion-vmware-bid.html "EU opens antitrust probe into Broadcom’s billion VMware bid") the merger, antitrust experts said. They could sue to [stop it if they think](https://www.financedigest.com/new-uk-pm-must-be-radical-to-stop-power-bill-catastrophe-think-tank.html "New UK PM must be radical to stop power bill catastrophe – think tank") it has an adverse effect on U.S. customers,” said Seth Bloom, an antitrust expert at Bloom Strategic Counsel. Binance is also under investigation by the U.S. Justice Department for possible violations of money-laundering rules, Reuters reported last week, one of a series of investigations this [year into Binance’s troubled history](https://www.financedigest.com/explainer-international-womens-day-date-history-and-this-years-theme.html "Explainer-International Women’s Day: date, history and this year’s theme") with financial regulatory compliance. Last month, [Reuters revealed fresh details about Binance’s strategy for keeping](https://www.financedigest.com/thomson-reuters-keeps-outlook-but-wary-of-slowing-economy.html "Thomson Reuters keeps outlook, but wary of slowing economy") regulators at arm’s length and continuing disarray in its compliance programme. Binance said in [response that it was helping drive higher industry](https://www.financedigest.com/corporate-social-responsibility-within-the-festival-industry.html "Corporate Social Responsibility Within The Festival Industry") standards and was seeking to improve its ability to detect illegal crypto activity. A spokesperson for the U.S. [Commodity Futures Trading](https://www.financedigest.com/a-brits-guide-to-understanding-commodity-trading.html "A Brit’s Guide to Understanding Commodity Trading") Commission said the agency is monitoring the situation. The Federal Trade Commission declined to comment. TURBULENT RELATIONSHIP Two of the most powerful moguls in the [crypto industry](https://www.financedigest.com/belaruss-high-tech-park-announces-second-phase-legal-framework-cryptocurrency-industry-bid-become-leading-crypto-nation.html "Belarus’s High Tech Park Announces Second Phase Of Legal Framework For Cryptocurrency Industry In Bid To Become Leading Crypto Nation"), Bankman-Fried and Zhao, known by his initials CZ, have had a turbulent relationship. In late 2019, Binance invested in FTX, then a far smaller exchange, before exiting the [investment in July last year](https://www.financedigest.com/liverpools-new-chinatown-perfectly-positioned-for-property-investment-this-chinese-new-year.html "Liverpool’s New Chinatown perfectly positioned for property investment this Chinese New Year"). By then FTX had mushroomed into a growing rival to Binance, which dominates the crypto industry with over 120 [million users](https://www.financedigest.com/spotifys-monthly-active-users-top-500-million-beat-estimate.html "Spotify’s monthly active users top 500 million, beat estimate"). Tensions between Zhao and Bankman-Fried surfaced in recent days, with a public disagreement playing out on Twitter, following a report by news website CoinDesk on a leaked balance sheet from Alameda Research, a trading firm founded by Bankman-Fried that has [close ties with FTX](https://www.financedigest.com/galois-capital-flagship-fund-to-close-after-ftx-losses.html "Galois Capital flagship fund to close after FTX losses"). The pace of withdrawals proved to be too much, however. On an average day, we have tens of millions of dollars of net in/outflows,” Bankman-Fried wrote in a message to staff sent on Tuesday morning, [saying how that amount had run into billions](https://www.financedigest.com/rio-tinto-says-output-from-2-4-billion-serbia-lithium-project-to-be-delayed.html "Rio Tinto says output from .4 billion Serbia lithium project to be delayed"). FTX did not respond to a request for comment on the message to staff. In a tweet announcing the deal on Tuesday, Binance’s Zhao that FTX had “asked for our help” after “a significant liquidity crunch.” Bankman-Fried said his [teams were working](https://www.financedigest.com/finance-teams-have-been-left-in-the-dark-on-the-real-cost-of-working-from-home.html "Finance teams have been left in the dark on the real cost of working from home") on clearing out the withdrawal backlog: “This will clear out liquidity crunches. This is one of the [main reasons](https://www.financedigest.com/main-reasons-why-not-investing-is-riskier-than-investing.html "Main Reasons Why Not Investing Is Riskier than Investing") we’ve asked Binance to come in. “A \*huge\* thank you to CZ, Binance,” Bankman-Fried wrote. (Reporting by Tom Wilson in London and Hannah Lang in Washington; Additional reporting by Tom Westbrook in Singapore, Prentice in Washington and Angus Berwick and Anirban Sen in New York; Editing by Megan Davies, Catherine Evans and Matthew Lewis) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---